Published January 19, 2016|6 min read
When you’re buying a used car, there’s one question you definitely want answered: Am I getting ripped off? There are a few ways you could get ripped off. You could spend more than market value for the car. Or maybe the seller doesn’t disclose that the car is actually damaged in a major way.In the old days, you had venerable paperbacks such as Edmunds or Kelly Blue Book that would help you price out the value of a car. But now, with the internet, you have access to a ton of information about cars. You can potentially see if the car has been in an accident, used as a taxi, or had its odometer spun backwards.Before you buy that car, check out these resources and protect yourself (and your wallet) from getting ripped off.
Let’s focus on what that poor car has been through, first. Whether you’re buying a used car that looks pristine or has been damaged in some way, you want to make sure that you know the exact condition of the car you’re buying. Not only will this help you avoid major problems down the road, it will help you negotiate price as well.
Start with a report from the National Motor Vehicle Title Information System (NMVTIS), the government agency with the catchy name you just can’t forget. You actually won’t get a report directly from NMVTIS – instead, you can purchase one for a small fee from one of their partners, a full list of which you can find here.The NMVTIS was originally set up to prevent consumers from buying stolen and unsafe vehicles. When you look at the "five key indicators" that the NMVTIS reports to consumers, you can see that all of them speak to that goal:
Current state of title and last title date. This will help you verify that the person selling the car actually owns the car.
Brand history. "Brands" are labels used by state motor vehicle titling agencies that describe the state of a vehicle. Some examples include "junk," "salvage," and "flood." If you see a brand on an NMVTIS that has not been disclosed by the seller, there’s a good chance they’re trying to sell you a damaged car that has not been adequately repaired.
Odometer reading. Depending on where a car is brought in to get repairs, the mechanic may report the odometer reading to the NMVTIS. If you’re looking at the odometer reading on the car and it’s smaller than the last reported odometer reading in the NMVTIS report, you’re probably a victim of odometer fraud. You can also see if fraud has occurred in the past by looking at the full history of odometer readings.
Total loss history. Cars are typically declared a total loss or "totaled" if the cost of repairing the car to pre-loss value is higher than the value of the vehicle. As you can probably guess, it’s a good idea to know this about a car before you buy it.
Salvage history. If the car has been through a salvage yard, there’s a good chance it suffered from major damage at some point in its history. Again, you probably want to know this.
Currently, 87% of the U.S. vehicle population has some kind of information in the NMVTIS database, with more than half of U.S. states reporting data to the agency. While these are pretty good numbers, be aware that a NMVTIS report is not perfect. For starters, it can’t reveal anything that hasn’t been reported to it. There are a number of reasons why something might not be reported to the NMVTIS – an accident may have occurred in a state that doesn’t report to the agency, for example.However, when the NMVTIS report does catch something, it can help you verify information the seller is providing you or catch them in a lie. Considering you can get reports for about the price of a cup of coffee, it’s probably worth it.
If you’re anything like me, you’ve seen a lot of commercials for Carfax in your lifetime. The concept of Carfax and other private car history reporting companies such as AutoCheck is pretty simple. They take some publicly available information – such as the information available in a NMVTIS report, plus recall information – and combine it with information reported to them directly from mechanics, dealerships, and salvage yards. Assuming that everything in a car’s history has been reported, their reports are much more comprehensive.How comprehensive? Here’s the list of data points Carfax can provide you:
Brands, such as salvage, junk, or flood
Lemon history (as in, "that car is a lemon," not, "oh, that car has a history with the citrus fruit")
Total loss history
Frame / structural damage
Accident indicators from police reports
Service and repair information
Vehicle usage (as a taxi, a rental, leased vehicle, etc.)
CarFax will also attempt to tell you, based on this information, a price adjustment for the used car. You can see this by looking at one of their sample reports. In this sample report, for example, they suggest that the car is worth $2,700 less than the retail book value.Other companies, such as AutoCheck, offer pretty much the same product, which is to say that you probably won’t get different information by buying multiple reports. The reports are only as good as the information coming in, and these companies frequently partner with the same sources.Additionally, like the NMVTIS reports, a "clean" report does not mean that the vehicle is safe or that you are not getting ripped off, as this 2009 Consumer Reports investigation found. Consumer Reports discovered that, in many cases, cars that were severely damaged, but for some reason were not declared a total loss, came back with clean reports from multiple car history reporting companies.Consumer Reports still suggests buying a report, however. They’re often inexpensive, and if they do catch something, it can save you from getting defrauded or paying too much.
For years, if you wanted to find out the market value of a car years after it was released, you’d turn to paperback books such as Kelly Blue Book or Edmunds. While both of those old stalwarts are still around, and have embraced the digital media revolution, there are new sources of information available that may offer better data. In addition, with the rise of online marketplaces such as eBay and Craigslist, you can do a lot of pricing research on your own, without a retail book.ClearBook, a tool offered by TrueCar, looks at recent used car listings and sales from both the internet and private sellers in order to judge what the current market value of that make and model of car is. The tool claims to have analyzed over 3,800,000 sales as of writing.Essentially, ClearBook is offering a much better way of doing your own market research. You could, of course, go to a bunch of third-party marketplaces where people sell used cars – Craigslist is one, of course, but there are others that cater specifically to used car buyers and sellers. You should still do this research on your own, especially in your local area.You should also still look at the market value prescribed by Kelly Blue Book and Edmunds – even if their numbers don’t match your research (and some claim they lean heavily in the dealer’s favor), their values are still respected in the car buying community.Market value is only one part of the equation for figuring out how much you should pay. Other factors – such as how the car was used, where it was driven, and its repair history – can have a big impact on how much you should be willing to pay for a used car.
No matter what an online report says about the car, you should always get an independent vehicle inspection done before you purchase. An independent inspection can catch problems or fraud and help you negotiate price. Inspections are usually more expensive than a simple report; they typically cost between $150 and $400. However, an inspection is less expensive than overpaying for a damaged or unsafe car. If you plan on driving the vehicle, you should also perform your own test drive of the vehicle before you purchase it.
Looking up information about a used car is only one part of the car shopping process. For more information on how to buy a used car, I suggest reading the Federal Trade Commission (FTC) guide to buying a used car. The FTC is pretty much always on your side, and their guide gives a good overview of the entire process, including federal laws and warranty information.
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